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Hold-Up, Stakeholders and Takeover Threats

  • Chemla, Gilles
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    We analyze the impact of takeover threats on long term relationships between the target owners and other stakeholders. In the absence of takeovers, stakeholders’ bargaining power increases their incentive to invest but reduces the owners’ incentive to invest. The threat of a takeover that would transfer value from the stakeholders reduces their ex ante investment. However, the stakeholders may appropriate ex post some value created by a takeover. This can prevent some value-enhancing takeovers. We examine extensions to the disciplinary role of takeovers, takeover defence mechanisms, and trade credit, and discuss empirical predictions.

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    File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/4134/1/cereg200413.pdf
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    Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4134.

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    Date of creation: Jul 2005
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    Publication status: Published in Journal of financial intermediation, 2005, Vol. 14, no. 3. pp. 376-397.Length: 21 pages
    Handle: RePEc:dau:papers:123456789/4134
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